Spotify jumps 14% after the music-streaming giant reports record profit in the 2nd quarter

• Spotify shares jumped as much as 14% on Tuesday after it reported earnings.
• Total revenue grew 20% year-over-year in the second quarter,

Spotify stock jumped Tuesday as the company's latest earnings breezed past expectations and delivered its highest profit ever in the second quarter.

The quarter saw total revenue jump 20% year-over-year to €3.8 billion.

The streaming giant's shares jumped as much as 14% in trading on Tuesday before paring some gains. The stock was up about 12% to trade at $330.07 at 10:45 a.m. ET.

Spotify's record profits were driven by 12% growth in its premium subscribers and a 13% rise in its ad sales. The results outpaced analyst expectations and came months after the company embarked on efforts to improve efficiency and reduce costs.

In December, Spotify laid off 17% of its staff and cut two of its most popular podcasts, "Heavyweight" and "Stolen."

The company's new podcast strategy seems to paying off, as the company reported improved profitability in its podcast division after seeing little return on heavy investment in past quarters, including several costly deals with high-profile celebrities last year.

The company is also investing significantly in ad sales, which grew 13% in the quarter. A new in-house ad agency, as well as a new generative AI ad product, aims to make audio ads easier to create.

"We keep on innovating and showing that we aren't just a great product, but increasingly also a great business," CEO Daniel Ek said. "We are doing so on a timeline that has exceeded even our own expectations. This all bodes very well for the future."

During Tuesday's earnings call, Ek noted the company is making progress on a more expensive subscription tier.